Agencies remain optimistic

Ad agency execs say they're not seeing any immediate budget cuts by clients in reaction to the softening economy, and most are positive about the business climate this year.

"I personally think there is an opportunity for optimism," said John Osborn, president-CEO of BBDO New York, who last month traveled to the World Economic Forum in Davos, Switzerland, a weeklong economic conference attended by such government and business leaders as Microsoft Corp. Chairman Bill Gates and Cisco Systems Chairman-CEO John Chambers.

Osborn noted that the tone of optimism was set by U.S. Secretary of State Condoleezza Rice in an opening keynote address at the conference. "The U.S. economy is resilient, its structure is sound and its long-term economic fundamentals are healthy," Rice said in her speech.

Osborn said BBDO's clients have not cut their marketing budgets or plans this year in response to recessionary concerns. "I'm not seeing any clients pulling back. They are still launching new campaigns and rolling out new products," he said. "Clients who continue to invest during these times will succeed in the long haul."

He added that now is the time to raise the bar on developing quality work that produces results for clients. "We have to be careful about how we spend, be selective about where we spend and make sure that all marketing activity has a sense of purpose and impacts behavior change," he said.

Rick Segal, CEO of HSR Business to Business, Cincinnati, said, "Despite all of the noise and chatter in the media about economic conditions, we are not seeing any budget cuts from clients. If anything, they are being more aggressive in their marketing spend."

Segal said there is strong activity in new business, new ad campaigns and clients entering new markets this year. "The outlook is still very encouraging," he said. "The flow of RFPs and RFIs has been as active this year as in all the years we've been in business," he said. "If companies were truly in a bunkering-in mentality about the economy, they wouldn't be out hiring new ad agencies."

He noted that even in the construction and building materials business, which has been hit by the subprime mortgage crisis, he has not seen any marketing budget cuts among clients.

"Companies may be making less stuff, but they still continue to invest in communications to customers and building their brands," he said. "If you do that, the pattern is you will always emerge from a downturn stronger, your market share will improve and your weaker competitors will be shaken out."

Carl Anderson, CEO of Doremus, New York, also said he's not seeing any marketing budget cuts from clients. "We're still seeing spending across the spectrum, from brand to point of contact," he said.

However, Anderson said there has been a slight shift to marketing activities that are closer to the point of transaction.

"Instead of being heavily weighted across broad-based media and broadcast, people in this environment want to stay closer to their customers and closer to their stakeholders," he said.

Anderson also said there is increasing focus on proving ROI on marketing investments. "Clients are really looking at their agencies to justify their budgets and spending to make sure they're getting the most from their spending," he said.

Michelle Bottomley, COO of Ogilvy New York, agreed that current economic conditions are creating an even stronger demand for proving ROI.

"We are finding we can't hire analytics people fast enough," she said, pointing to Ogilvy's staff of more than 40 such employees in the U.S. "Clients are very interested in trying to figure out where to put the next marketing dollar, which combination of media is working most effectively, whom do we target, which groups have the highest potential and how to build marketing and media programs that surround the target audience."